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Monday, August 21, 2006

Interview with Bill Urschel, Founder of AdECN

Serial entrepreneur Bill Urschel is the founder and CEO of Carpinteria-based AdECN (www.adecn.com), a company developing an online advertising exchange marketplace. The venture backed company has raised $5.5M in (unannounced) venture capital funding so far, and is looking to create a more efficient marketplace for online advertising. I spoke with Bill about the company's marketplace, his background, and the firm's funding, as well as the company's quest to hire more people in the Santa Barbara area.

Ben Kuo: Tell me a little bit about your business and how it works?

Bill Urschel: AdECN is the first, real-time online exchange for advertising. We're modeling it after Island and Archipelago, the ECN where stocks are traded. It's like the stock market, except that it's all happening in a computer, where all the bids and trades are executed. As an exchange, our clients are the ad networks and similar entities. We are not just another ad network. What we're doing for our customers is providing liquidity. Just like the stock market, and ad network may have a good campaign, but run out of inventory--a place to put an ad in their own publisher base. In an exchange, they can shop those campaigns. Ad networks can also run out of campaigns, but still have good inventory left they could sell to a publisher. They use the exchange to find buyers for the inventory. To continue the stock market analogy--if a client goes into Merrill Lynch, and wants to buy 1000 shares of IBM, but they can't find a seller among their own customers, they go out to the stock market to fulfill the order. It's the same thing with online advertising. We're becoming the infrastructure for online advertising, and providing the ability to enter ad campaigns and ad spots. We provide over a dozen targeting methods, so advertisers know what they're buying. For example, that they are reaching a 40 to 50 year old male in Los Angeles on a sunny day, and who is visiting a site on small aircraft. It's a real-time auction, on a CPM basis, where the highest bidder wins. When someone lands on a web page, it triggers an auction on all advertisers in under 100 milliseconds. We also provide the ad serving itself, and all of the accounting.

Ben Kuo: Do advertisers like that--buying ads on sites on a different ad network, without know what sites they are going on?

Bill Urschel: Yes and no. Some advertisers are very site specific, and want to know the specific sites that their ads show up on. That's why many of the sites on our members networks are open--you can see what sites you are advertising on. However, other sites are blind, and you don't know which site it is--just the content, subject matter, that sort of thing. Many advertisers don't mind running on blind sites, because of the lower price they pay. You have to pay a premium on other sites, but the problem for those sites is kind of interesting. If you're Forbes.com or a high end site, you probably don't want to undermine your own sales people by selling inventory at a lower price. So, those sites remain blind. Other sites may not care.

Ben Kuo: How far along are you on launching your ad exchange?

Bill Urschel: We launched in October of 2005, with our first seat on the exchange, Experclick. We now have eight or nine ad networks rolling, and it's going pretty fast. We started bringing on additional members about a month ago, and there's very strong interest.

Ben Kuo: Tell me a bit about your background, and how the idea for the site came about?

Bill Urschel: My background is I've had a string of software companies, all located in Santa Barbara. The first that grew to any size was Arc Tangent, which I started in the early 80's and sold in 1992. It produced high end marketing software. I founded a company that developed a manufacturing software product, Alliance Manufacturing Software, which really got rolling in 2002. Why I got involved in this marketplace was it was very interesting to me. I was looking for the next vital market with a huge opportunity. I liked online advertising, because in 2002 and 2003, the expected size of the market was $6 to $7 billion in 2003. But what really attracted to me was the waste and inefficiency in the market. The technology that ad networks were using, and their business models were grossly inefficient. There were too many middlemen taking bites out of the transaction. I felt the stock market approach would bring massive efficiency. That's what we're doing--bringing efficiency to a big and inefficient market. We cut out the middlemen, and everyone left wins. Publishers win, because they get higher prices for inventory, the advertisers win because they get better targeted exposure for better value, and we win because of the benefit we provide our downstream clients.

Ben Kuo: Tell me a bit about the funding of the company, and your venture capital?

Bill Urschel: Our first funding was $2.4 million, in various angel fundings. Khalda Development was our original investor. Our Series A, with Novus, Labrador, and the Band of Angels, closed in February, and that was $3.1M. We also had participation from some of the Tech Coast Angels.

Ben Kuo: What's the next thing for the company now?

Bill Urschel: We're at a pivotal moment. We're rolling out the exchange and bringing on additional members. We opened it up to new members a month ago, and have been running around explaining to the ad networks and ad agencies and mega-publishers that they ought to come on as a partner. Most of our members are ad networks, but some are ad brokers. The difference is that an ad network has infrastructure for ad serving, a broker does not. We've also included some ad agencies, who represent clients with lots of inventory. We're avoiding people who are purely advertisers and publishers.

Ben Kuo: How many people do you have now, and are they all in Santa Barbara?

Bill Urschel: We have 32 people, and almost all are in Carpinteria. We do have a couple of sales people in remote locations, including Vancouver and San Francisco. We're looking to hire eight spots right now.

Ben Kuo: I hear from other people that it's tough to hire in the Santa Barbara area?

Bill Urschel: Yes, it's a tough town in a way, with housing prices as high as they are. However, there are lots of ad networks up here--ValueClick started up here, Commission Junction is still up here, Fastclick is up here. The founders of DoubleClick retired here. Santa Barbara is a strange town, with all these ad networks up here. We've gotten lots of employees who used to work for our clients.